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Malwa Vanaspati and Chemical Co. Vs. Appellate Collector of Central - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(17)ELT393TriDel
AppellantMalwa Vanaspati and Chemical Co.
RespondentAppellate Collector of Central
Excerpt:
.....the claim regarding this item.as regards (ii) above, which has been described in the documents as "trade discount of freight", we do not agree with the argument of shri kohli that this is a trade discount as understood in the commercial parlance. the learned counsel submitted that the supreme court have recently clarified that a trade discount should be allowed by whatever name it is described. presumably, shri kohli has referred to the judgment dated november 14/15, 1983 of the honourable supreme court whereby their lordships clarified certain points arising out of main judgment dated 7-10-83 referred to earlier. the relevant portion from the judgment clarifying the scope of the expression 'trade discounts' is reproduced below for ready reference : "trade discounts : discounts in the.....
Judgment:
1. This appeal is directed against the order of the Appellate Collector of Central Excise & Customs, New Delhi dated 19-5-76. Originally preferred as a revision application before the Central Government, on transfer to this Tribunal, the same is being treated as an appeal and is being disposed of as such.

2. The appellants have claimed exclusion of two items from the assessable value, namely :- (i) cost of metal containers in which the vegetable product was to be packed for sale; and As regards (i) above, the Supreme Court has held by their recent judgment [1983 E.L.T. 1896 (S.C.) Union of India and Ors. v. Bombay Tyre International etc. etc.] that the cost of primary packing has to be included in the assessable value of excisable products. There is, therefore, no force in the claim regarding this item.

As regards (ii) above, which has been described in the documents as "Trade discount of freight", we do not agree with the argument of Shri Kohli that this is a trade discount as understood in the commercial parlance. The learned counsel submitted that the Supreme Court have recently clarified that a trade discount should be allowed by whatever name it is described. Presumably, Shri Kohli has referred to the Judgment dated November 14/15, 1983 of the Honourable Supreme Court whereby their lordships clarified certain points arising out of main judgment dated 7-10-83 referred to earlier. The relevant portion from the judgment clarifying the scope of the expression 'trade discounts' is reproduced below for ready reference : "Trade Discounts : Discounts in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale of by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price." 3. From the above clarification it is quite clear that to qualify to be treated as a trade discount, it should be so treated by established practice in the trade. In other words, a trade discount can be expressed in a different nomenclature in the sale documents. What the Supreme Court have held is that mere nomenclature is not material: what is material is that the deduction sought should be recognised by an established practice of the trade as a trade discount. In the instant case the expression used is 'trade discount for freight'. The exact scope of the expression is not clear. In the commercial world also, one does not come across the expression trade discount of freight. In the present case, it appears to us from the record that the appellants have reduced freight charges at the rate of rupee one per container to their customers. This is something quite different from a trade discount as understood by the trade and further clarified by the Supreme Court observations given above. We, therefore, hold that this ad hoc reduction of Re. 1/- per tin described as 'trade discount of freight' cannot be excluded from the assessable value of the goods.

4. In the result we do not find any force in this appeal and dismiss the same.


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